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IB98034

MOST RECENT DEVELOPMENTSMarch 17, 2005 - Taiwan's cabinet approved a $15.5 billion reduced special defensebudget to purchase weapons from the United States. The original budget of $18.2 billion hadbeen criticized as too high by opposition legislators.March 16, 2005 - The House of Representatives passed H.Con.Res. 98, a measureexpressing Congress' "grave concern" about China's passage of the anti-secession law. Themeasure passed by a vote of 424-4.March 14, 2005 - China's NPC enacted an anti-secession law aimed at reining inTaiwan's independence advocates. U.S. officials called the law "unhelpful."December 27, 2004 - The PRC published a white paper, "China's National Defensein 2004," calling Taiwan's independence advocates the "biggest immediate threat to China'ssovereignty and territorial integrity."December 11, 2004 - The opposition KMT party made gains in Taiwan's legislativeelections, slightly increasing its majority over the DPP. The KMT coalition will now holdat least 114 seats in the new 225-member legislature, with the DPP holding 101. The KMTvictory was considered a sharp voter rebuke to DPP President Chen Shui-bian's lessmoderate policies.October 25, 2004 - In Beijing, U.S. Secretary of State Colin Powell said Taiwan wasnot a sovereign state and that the United States supported Taiwan's peaceful reunificationwith China. Critics charged the Secretary's statement violated long-standing U.S. policy,which has avoided taking a U.S. position on the desirability of reunification.BACKGROUND AND ANALYSISU.S. Interests in TaiwanU.S. involvement with the government of Taiwan (known as the Republic of China orROC) has its roots in the World War II U.S. alliance with the Nationalist Chinesegovernment of Chiang Kai-shek on mainland China. But while the allied victory over Japanand Germany meant the end of conflict for much of the world, it did not mean the end ofconflict in China. For the Chinese government, it meant the resumption of a civil war againstrebelling Chinese communist forces led by Mao Zedong. By October 1949, Mao's forceshad pushed the Nationalist Army off the mainland, and the remnants of Chiang's governmentfled to Taiwan, an island off the south China coast. While on the mainland, the ChineseCommunist Party declared victory and established the People's Republic of China (PRC);Chiang's ROC government on Taiwan insisted that the communist government in Beijingwas not credible, that the ROC government was the only legitimate government of all China,and that ROC forces would regroup on Taiwan and one day retake the mainland. For thenext 30 years, the United States supported this claim with U.S. military protection and over